Board of Advisors

Board of Advisors Definition

Board of advisors is an informal group of people who have professional knowledge and business experience and provide advice/suggestions, solutions to business issues to the management of the entity. It consists of expertise persons in legal, accounts & finance, human resource, sales & marketing, etc.

Functions of the Board of Advisors

Board of Advisors Agreement

The board of advisors agreement is the registered formal legal agreement executed between the entity and each member separately. There are some specific and general terms and conditions such as tenure, fees, nature of services to be provided, etc. Members are not employees/directors of the entity and they don’t have any power and control over the entity.

Below are some points which should be part of advisors agreement:-

Board of Advisors

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How to Set Board of Advisors?

Importance

  • They help to resolve the business issues, provide expert opinion on the affairs of the entity ask by the management.
  • Provide advice/ suggestions on how to maximize the profit and wealth of the entity.
  • It plays a vital role in the growth of the entity.

Board of Advisors vs Board of Directors

DescriptionBoard of AdvisorsBoard of Directors 
MeaningIt is an informal group of some persons who provides a professional opinion to the management of the entity.It is a formal group of persons who provides their services to the entity.
RelationshipThere is no direct relationship with the entity. Agreement executed on a Contractual basis. They are external persons.The direct relationship between employer-employee relation i.e. employment basis. They are internal persons.
Voting RightsNo Voting Rights.Voting rights are given to the Board of directors.
RemunerationsFixed as per AgreementFixed as per the Appointment letter offered.
TermsFlexibleFixed
Selection ProcessSelected by the board of directors.Selected by the shareholders.
ResponsibilityThey provide their opinion basis of professional knowledge and experience.They are directly responsible for the entity whatever they are doing in the course of employment.
Work ProfileThere work is defined in the advisory agreement.There work is defined in the appointment letter.

Advantages

Disadvantages

  • It provides the only opinion with a subjectivity basis and the opinion shared by advisors can be taken for consideration or not as it depends on key persons of the entity.
  • Advisors don’t have direct interest/benefit into the company so they provide the advice/suggestions basis their knowledge and experience.
  • They are not liable for any loss or liability of the entity as they are not employed.

Conclusion

  • Every entity should hire a board of advisors on a contract basis that provides their expertise opinion/advice/suggestion to the entity so that entity can manage and grow its market share and the burden can be reduced from the board of directors.
  • If an entity doesn’t want to involve external persons in the affairs of the entity then they should hire such employees who have expertise in the same field so that they fulfill the requirement of the board of advisors.

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This has been a guide to the Board of Advisors and its definition. Here we discuss functions, agreement of the board of advisors, and how to set it along with its differences, advantages, and disadvantages.